Cycling through Peloton’s S-1
In anticipation of Peloton’s IPO, we reviewed statements made in the company’s S-1 against the credit, debit, and ACH records of millions of anonymous U.S. consumers.
Peloton fitness offerings consist of fitness equipment, including bikes at $2K+ and treadmills at $4K+, as well as subscription offerings, including a Connected Fitness subscription for $39/month which requires a Peloton equipment purchase, and a digital app for $19.49/month which provides access to Peloton’s content library.
The below analysis focuses on Peloton’s subscription offerings.
- Earnest data shows that Peloton Connected Fitness subscribers grew ~17x in the last three years. Our data also shows that the Digital Subscriber base is small and growing.
- Earnest churn logic shows churn of 0.82% for the most recent quarter, and a meaningful uptick into the current quarter at 1.15%.
- Cumulative churn within the first year of several monthly cohorts (August ‘18 – March ‘19) was 10% or lower, reflecting a retention rate at or above 90%.
- Fewer Peloton subscribers are paying for SoulCycle and FlyWheel, and a growing number of SoulCycle and FlyWheel members are choosing to subscribe to Peloton.
- Using income data, we found that the cohort of subscribers making less than $75K per year comprises ~7% of total subscribers, and recently began outgrowing the cohort of subscribers making over $75K per year.
“We are a fast-growing and scaled fitness platform.”
Earnest data shows Peloton Connected Fitness Subscribers grew ~17x in the last three years, reflecting the company’s fast-growing profile, as well as a small but growing Peloton Digital Subscriber base.
“The growth of our Connected Fitness Subscribers was primarily driven by the increased number of Connected Fitness Products delivered during the period and our low Average Net Monthly Connected Fitness Churn of 0.65% for fiscal 2019.”
Earnest churn logic* yields the lowest churn, at 0.82% for the most recent quarter, and also shows a meaningful uptick into the current quarter at 1.15%.
“Usage drives value and loyalty, which is evidenced by our exceptional weighted-average 12-month Connected Fitness Subscriber retention rate of 95% across all fiscal year cohorts since fiscal 2016.”
In order to approximate month-to-month retention, we looked at cohorts of new Peloton subscribers subsequent to Peloton’s July 2018 termination of its prepaid payment options (members were able to earn one to three free months if they prepaid for a 12-, 24-, or 39-month subscription). Cumulative churn within the first year of each of these cohort’s life was 10% or lower, reflecting a retention rate at or above 90%.
“There are a number of factors that could lead to a decline in Subscriber levels or that could prevent us from increasing our Subscriber levels, including…our Members engaging with competitive products and services.”
We see fewer Peloton subscribers paying for SoulCycle and FlyWheel, and a growing number of SoulCycle and FlyWheel members choosing to subscribe to Peloton.
“We continue to broaden our demographic appeal—our fastest growing demographic segments are consumers under 35 years old and those with household incomes under $75,000.”
We cohorted Peloton subscribers by gross salary and found that the cohort of subscribers making less than $75K per year comprises ~7% of total subscribers and recently began outgrowing the cohort of subscribers making over $75K per year.